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2017 (12) TMI 657

Addition on account of transfer fees and premium received from members on utilization of Transfer of Development Rights - concept of mutuality - Held that:- Issue relating to taxability of the amount of trans charges is squarely covered in favour of the assessee by the decision of Hon’ble Bombay High Court in assessee 's own case for the previous years wherein the decision of the Tribunal holding that voluntary contribution received by the assessee society from its members as transfer charges is .....

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g Society. During the year under review the assessee society has received an aggregate amount of ₹ 7,64,271/- incidental to the transfer of the plots in the society as contribution from its members. Further the assessee society has also received an aggregate amount of ₹ 26,80,203/- as contribution from its members pursuant to the construction on Plots using Transfer of Development Rights (TDR). The said TDR rights he been acquired by the members directly and the Society has merely re .....

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During the year under the assessee society has received an amount of ₹ 7,64,271/- on account of transfer of the plots in the society as contribution from its members. Further the assessee society has also received an aggregate amount of ₹ 26,80,203/- as contribution from its members pursuant to the construction on Plots using Transfer of Development Rights (TDR). The said TDR rights have been acquired by the members directly and the Society has received contribution from its members .....

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ing the year under review the assessee received ₹ 7,64,271/- from incoming Members. The assessee during the year has disclosed the above receipts as exempt from tax on the basis of Principle of Mutuality. During the appellate proceedings, appellant has stated that the appellant received contribution from its members on the transfer of lease of the plots by such members to other new members. Such amounts received belong absolutely to the society and the benefit thereof was receivable only b .....

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ust be an identical body. That does not mean that each member should contribute to the common fund or that each member should participate in the surplus or get back from the surplus precisely what he has paid. What is required is that the members as a class should contribute to the common fund and participators as a class must be able to participate in the surplus. 5.6 The Hon'ble Bombay High Court in the case of Sindh Co-operative Housing Society vs. ITO 317 ITR 47 (Born) is held that the c .....

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ed for AY 200405 and AY 2005-06, The Hon'ble ITAT, Mumbal in case of Friends Co. Operative Housing Society Limited has held transfer fees as exempt. The Hon'ble ITAT Bench 'B' in case of New Breach Candy Co-op Hosing Society Limited wherein the transfer fees have been held exempt. At the time of hearing before us, the ld. Representatives of both the sides have agreed that the issue involved in ground No. 1 of the Revenue's appeal relating to taxability of the amount of trans .....

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use of TDR. The assessee has claimed that the aforesaid contribution is not chargeable to tax. The Contribution from members is exempt from the tax under the Principle of Mutuality. The aforesaid contributions have been received from the members of the Society incidental to the use of the T.D.R. on their respective plots. The contributing members continue to be the members of the Society even after such contribution. The persons entitled to the benefit of the aforesaid contribution are also all .....

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ve housing society based on our earlier discussion. (1) Is there any commerciality involved. This has to be found from the bye-laws of the co-operative housing society. In the case of the cooperative housing society, admittedly, there is no commerciality involved. Once there is no commerciality involved the first test of profitability does not exist. The first requirements of mutuality is, therefore, met. (2) From the moneys received are the services offered in the nature of profit sharing or pr .....

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4) Do the members have the right to share in the surplus and do they have a right to deal with its surpluses. In terms of the by laws it is only the members who have a right to share in the surplus. Under the Maharashtra Co-operative Societies Act, no part of the funds, as provided in section 64 can be paid by way of bonus of dividend or otherwise distributed among its members except as provided therein. Under section 67, there is a limit on the dividend to be paid on liquidation Under section 1 .....

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nce of any distinguishing feature brought on record by the Ld.DR we respectfully following the decision of Hon 'b/c Jurisdictional High Court (supra), hold that the amount of transfer fee of ₹ 5,81,000/- and TDR premium amount of ₹ 5,97,725/- are not taxable on the principle of mutuality and accordingly we are inclined to uphold the finding of the Id. CIT(A) in deleting both the additions made by the Assessing Officer. The grounds taken by the revenue are, therefore, rejected. Ho .....

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asons. (a) That it is not tainted with commerciality, rather fails under the concept of mutuality. Therefore, not liable to be taxed. (b) That under the cannons of taxation, the receipts which are a capital nature are not exigible to tax In the case of the appellant the impugned receipts arising on account of premium on TDR i purely a capital receipt and therefore, outside the purview of tax charge. (c) That it cannot be taxed u/s.45 as no Capital Gains could be levier on this right having no co .....

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After considering the totality of facts, rival submissions, the applicable law and on the basis of discussion mentioned above, I find force in the argument of the appellant and draw strength from the decision of Bombay High Court, and Tribunal and predecessor's order, I have come to the conclusion that the amounts received by the appellant Society from its members as TDR and transfer fees should not be chargeable to Income Tax on the principle of mutuality. Therefore, A.O. is directed to del .....

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